Treasurer Joe Hockey has declared the Government will "not negotiate with a gun to our heads" in response to calls for more assistance to the car industry.

The Federal Government has released the terms of reference for a Productivity Commission inquiry into the sector, and says car manufacturers in Australia will have to wait until it reports next year to find out if they will receive any more financial support.

Hundreds of millions of dollars in taxpayer funding has been handed over to car companies in recent years to help them deal with the impact of the high Australian dollar and a dramatic drop in sales.

The Coalition had planned to cut $500 million of assistance, but Mr Hockey says the Government will not make any decisions until the Commission reports next year.

Key points

Productivity Commission reviewing car industry

Manufacturers will have to wait until next year for any more money

Ian Macfarlane says he's "not ruling anything in or out"

Holden has said it needs to know about funding before Christmas

"I'm not in the business of ruling things in or out," he said.

"Let's have a proper process.

"But we don't negotiate when it comes to taxpayer's money with a gun to our heads, we won't do that."

The Productivity Commission will deliver its preliminary findings in December and a final report by March 31 next year.

Jay Weatherill says March deadline unacceptable

South Australian Premier Jay Weatherill has said that Holden needs to know before Christmas if it will receive any more money on top of the $215 million in federal funding announced in March by the then-Gillard government.

He says the March 31 timeframe is unacceptable and will increase the risk of Holden closing.

"This is an urgent matter. What they're suggesting is that we should wait something in the order of six months for a response to Holden's proposition," he said.

"That increases the risk of the closure of Holden unacceptably and I've communicated this in clear terms to [Industry Minister Ian] Macfarlane.

"Holden would be secure today if the previous federal government's policy had been implemented."

But the Treasurer says the Government has a "responsibility to the entire Australian economy".

"We are not running down the street chasing an individual car maker with a blank cheque made out by the taxpayers - it's got to be a partnership," he said.

"If Holden decide that they're making their decisions for their company and their shareholders, well they're entitled to do that.

"We don't want to see any job losses - of course we don't, but also we want to ensure that Australian taxpayers are not being held to ransom by any company at all."

"We've been in - what? A month and a half. I hope Holden don't leave, I really do, I hope the jobs continue but this is not in our hands."

The Government has asked the Commission to look at the national and international factors affecting the industry, including its current structure, investment, profitability and consumer preferences.

It wants the review to take into account the assistance other countries provide to their own car sectors, the impact of "workplace arrangements" in the industry, government vehicle purchasing policies and the spill-over benefits of the technology used in car production.

This is a process that has to take time. We can't just throw out a heap of money and hope we can fix it.

Mr MacFarlane is in talks with Toyota today in Tokyo and says he will be showing them the terms of reference for the review and "making it clear" the Government will not respond before late April at the earliest.

Official figures released earlier this year showed that the sector employs 55,000 people and supports another 200,000 jobs across Australia.